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CA Intermediate · Cost and Management Accounting · Introduction to Cost and Management Accounting

Which of the following best distinguishes management accounting from cost accounting?

Management accounting draws on financial data, cost data and other information to help management with planning, control and decision making, so its scope is wider. Cost accounting mainly ascertains, records and controls costs. The other statements wrongly assign users, legal formats or time orientation.

  1. AManagement accounting uses both financial and cost data to assist all managerial decisions, while cost accounting focuses mainly on ascertaining and controlling costsCorrect
  2. BCost accounting is concerned only with external reporting to shareholders, while management accounting serves only tax authorities
  3. CManagement accounting must follow statutory formats prescribed by law, while cost accounting need not follow any technique
  4. DCost accounting deals only with future projections, while management accounting deals only with historical records

Explanation

Management accounting has a wider scope, drawing on financial accounting, cost accounting and other data for planning, control and decision making. Cost accounting centres on cost ascertainment, control and reduction. The other options misstate the users, formats or time orientation of both.

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